Because a Great Nation is a Terrible Thing to Waste

European Politics

Paper money (“fiat money”) endorsed by John Law. Photograph is in the public domain.

I grew up in south Mississippi as a twelve-year student of the Ocean Springs School District. I’m grateful for the excellent education given to me there. As early as third grade I was required to study a foreign language (I chose Spanish); at some point I was also introduced to the formal study of Mississippi history, which fascinated me. There I learned one of my earliest lessons in economics–in addition to those being taught to me at home by my father who was a banker. I remember to this day the lessons learned in history class while studying an event known as “the Mississippi Bubble.”

With the arrival in “Biloxey” (now spelled “Biloxi“) of the explorer Pierre LeMoyne d’Iberville in 1699, the French laid claim to a massive amount of land in what would one day be called the United States of America. It stretched from Louisiana to Newfoundland and included territory on both sides of the Mississippi River. You don’t need much creativity to imagine the financial steam that this discovery brought to France. Powerful people with connections to the French monarchy were quick to line up for a piece of the economic pie. You see, some things in history are fairly constant. One of those constants is the sycophancy of influential people who make a better-than-average living from their relations with powerful people in government.

It’s an incredible tale that includes many of the same elements being debated today: fiat paper money, greed, monopolies, Keynesian economics, powerful government, and little benefit to most citizens. If you want to read all the interesting details for yourself (and I certainly recommend that you do so), read the 2012 article by Forbes economist Jesse Colombo, located HERE.

To keep the story to essentials, let me give you a quick review. It seems that a powerful Frenchman of the early 18th century was in dire need of cash. To remedy the situation he turned to a Scottish financier then visiting France, a man named John Law, who introduced the French to a new concept. Rather than trading with precious metals like gold and silver, he suggested to them that a bank should be established by royal decree and that this bank should issue money made of paper. The paper, of course, was of no value except for the promise it carried to its bearer. We now know such money by the name of “fiat” currency, from the Latin word fiat, meaning “let it be done” (the “it” in this case is the assignment of monetary value to something that has no such value except by way of promise and expectation).

A tremendous rush of money began as people sought to capitalize on land in the New World. Law became amazingly wealthy, in cash and in power. He had the power to mint coinage and collect taxes. He had the trust of some of Europe’s most powerful people. He purchased an ailing institution known as the Mississippi Company, gave it a new name and sold shares that expanded in price at an unsustainable rate. The French crown pumped money into his scheme and so many people profited that the French term millionnaire came into vogue.

Eventually, cooler minds began to wonder about the wisdom of investments that skyrocket at such impressive levels while fueled by government-approved fiat money. Confidence faded. Investors demanded gold rather than paper and the entire scheme began to collapse. Company shares were drastically reduced and the millions earned became millions lost. The so-called “bubble” (Colombo says it’s better described as a series of “failed monetary policies“) was a product of excessive monetary growth. In other words, there was an explosion of money but not necessarily of value. In the end, the value of the money declined and inflation set it.

I’ll leave it to my dear readers to discover parallels to today’s world. In the last few months there has been an increase of voices reminding us that all bubbles eventually burst. And economic bubbles always rise higher and faster when inflated with easy government money. Time will tell.

If you compare the electoral maps of the 2008 and 2012 presidential elections, you’ll see that very little has changed in terms of how the state electoral votes will actually be cast on December 17th. Romney garnered a few more electoral numbers than McCain (206 to 173), but the overall pool of nationwide voters was down. Approximately five and a half million fewer voters turned out for this election than in 2008.

One of the biggest mistakes that Romney made in his campaign was to present the economic issue as “us vs. them.” As I have often pointed out here, the tide of those who receive government benefits is growing rapidly while the number of taxpayers is shrinking. That isn’t the combination for a successful economy; it’s bad news for the future. But it’s understandable that people vote to keep their benefits coming. Mitt Romney was right to point this out, but he did a poor job of explaining why it’s such a dangerous situation to be in.

It’s not “us vs. them.” Nor is it really “the makers vs. the takers” or anything else like that. It’s about us–all of us. By describing the free market in a way that divides us (as Democrats often do) we misrepresent its communal nature and we allow ourselves to be duped by the rhetoric of the left. Simply put, Republicans must make the case for why our current spending is a path of destruction–not for the rich but for the poor and the middle class. Romney was painted as the wealthy guy who resents the poor and the working classes. I don’t for a moment think that hey believes that, but the Democrats did a good job of making it appear that he does.

How high will spending go? Will it get to $20 trillion? Perhaps $24 trillion? Economic bubbles eventually burst. That includes monetary bubbles. Maybe we’ll be fortunate enough to avoid a complete meltdown. But must we take the chance? Can we awaken from this dreamworld of never-ending spending that our political leaders have led us into? The one good thing about Obama’s re-election is that if the double-dip recession does become a reality, there won’t be a Republican in the White House for the Democrats to blame, though they’ll undoubtedly try to blame the Republican-controlled House of Representatives. (Given the timid nature of Speaker John Boehner and his merry band of big-spending Republicans, that will be especially ironic.)

By the way, that predicted double dip is now a reality in Europe. We can expect it to move our way in the near future. As it does, the economic darlings of the left will continue to push for more spending and higher taxes. This includes the intractable Paul Krugman. In a recent column he sang the praises of 91% federal taxation. That’s right. He seems to like the idea that a wasteful, bloated, overspending federal government should be allowed to return to the days of taking nearly all the money of the very wealthy. He wants them to pay their fair share. We hear that often these days, don’t we? How much is fair? If they take 100%, will that finally be fair?

In the midst of all this, it appears that the GOP has lost its soul. New Jersey Governor Chris Christie got to take a ride on Marine One (the president’s helicopter) and to speak to Barack Obama and Bruce Springsteen while they rode on Air Force One. Who knows? Maybe he even voted for Obama. Now he has made his debut on Saturday Night Live. His constituents probably enjoyed seeing their governor on TV. Well, those who have electricity anyway. These are unfortunate signs of the time.

Don’t look for genuine leadership from most of the GOP. Instead, you should expect them to stomp their feet and to talk a good game. All the while they’ll do only what they have to do in order to appear to oppose Obama. Our nation’s capital is a stage on which the players perform. Perception is everything.

Even I was surprised on November 6th, but now I’m listening more attentively. As Republican leaders argue about turning further left and becoming even more like their Democrat counterparts, I wonder if we really have a two-party system anymore. The Democrats kept the White House and the Senate. The Republicans kept the House. The electoral map has barely changed. That speaks more to me of apathy than an energetic mandate.

Republicans, take note. Becoming more like Democrats is the wrong lesson to take from this election. Drinking their Kool-Aid is intoxicating, but it makes you lean left. It doesn’t look good on you. Give the voters an alternative vision, one that is inspired by the constitutional values and free-market inventiveness that made this country great.

This vision might be a hard thing to sell to voters who have been poorly educated in these truly American values, but acting more like liberal Democrats isn’t winning the GOP any friends. In fact, it appears to be losing them the few that they already have.

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A dear friend wondered aloud on his Facebook page recently why so many of us are upset by the Supreme Court’s 5-4 ruling on the constitutionality of most of the Affordable Care Act (Obamacare), including the individual mandate. I don’t have the heart to respond. I suppose our political worlds are just too far apart.

Political disagreement doesn’t bother me in any philosophic or personal sense. It is in the nature of our existence as humans that we’re going to disagree about what makes life good, and about morality in general, and about the forms of government to which we ascent. I truly do understand that.

On the other hand, we citizens of the United States have a form of federal government that is already in place. We can argue and debate many things, but one thing seems clear to me and it seems so clear as to be beyond debate: the only way the Founders were able to get sovereign states to sign on to the compact known as the US Constitution was by guaranteeing that their sovereignty and the rights of their particular people would be respected. So, while I’m not upset that people disagree about government and its purposes, I’m terribly distraught and at this point quite frightened and somewhat disillusioned that so many fail to understand the context, purpose, and intent of the Constitution. But even worse: I’m startled and disturbed by the manner in which the Constitution is ignored or misrepresented by most of those in the federal halls of power–now including the Supreme Court.They appear to think that the mere passage of time has invalidated the limits placed upon the federal government.

If you find my argument less than convincing, imagine how such a lack of objectivity would function in any other court in the land. Imagine if a judge or jury, supposedly disinterested and unbiased in order to guarantee a fair trial, were to decide that their job is to find a way to put you in jail no matter what the facts are. See my point?

Whatever happens next with regard to Obamacare, so-called progressives will not rest until the United States has a centralized single-payer system administered by the federal government. That was the goal of the Affordable Care Act and it remains the purpose toward which its implementation is moving us. Federal regulations on insurers, limitations on insurance contracts and provisions, and even changes to the military insurance program (TRICARE) are designed with this end in sight.

Here are a few things we can look forward to if Obamacare if not overturned and if we continue moving toward a single-payer system as we are doing now. My predictions aren’t the product of gazing into a crystal ball, but come simply from studying the record of government involvement in other issues of our lives, and from looking at similar programs in other welfare nations.

First, the goal is that private insurance and private medical arrangments–even if paid for by one’s own personal funds–will be illegal, and will result in severe penalties. Waiting times will increase dramatically and the wealthy among us will simply go to other countries for the medical procedures they need. The United States will no longer be the country where the wealthy of other countries come for surgery unless they are able to take advantage of my second prediction.

What is my second prediction? That’s easy: our elected officials will have access to better and quicker healthcare than the constituents they supposedly represent. You can count on that. No matter what happens, they’ll see that they get the best for themselves and their loved ones. That’s one of the perks to being among the political elite.

Third, the entire plan will cost far more than anyone has even begun to suggest. The process to realizing this has already begun.

Fourth, in an attempt to control costs, the federal government is going to insist on massive new intrusions into our personal lives. By federal law, our health records are already being maintained electronically. And progressives in some states and cities are already putting intrusive food-related measures into place. We can expect all sorts of new regulations and limitations on any substances considered unhealthy: alcohol, edible fats, salt, types of carbohydrates, sizes of food containers, and an eventual absolute ban on tobacco.

I can easily imagine that, under a nationalized healthcare system, we’ll be forced to undergo certain medical tests to ensure that we are complying with the law. Simple blood tests will be the espionage system that gives the truth of our activities to the government (in other words, our bodies will be tattling on us to government representatives who will then take the necessary measures to punish us through taxation or worse). I can already imagine the conversations between doctors and patients.

Patient: “Well, doc, I tried. I stopped for a week or two but the habit was too strong. I went back to smoking … but hey, I was able to cut back to only half a pack a day.”

Doctor: “Nonetheless, you realize that the law requires me to report this fact to the national health agency. Otherwise I’ll lose my medical license.”

Patient: “No, wait … please, doc, I can’t afford another increase in my taxes … they’re getting outrageous. Ever since my cholesterol went up and you told the feds about it my health-related government fees are eating me alive. My family and I are looking to sell our house and get a smaller one just so we have more money to send the government for cover our lifestyle fees.”

(By the way, if the part about downsizing a home in order to have more money to give to government sounds ridiculous, then you need to take note of the rising number of retired elderly people who are selling their homes because they can’t afford the property taxes.)

For now the part about government “lifestyle fees” is just a horror story. But before now who would have thought that the highest court in the land would say that it’s ok for the feds to force us to buy something under penalty of law? Justice Roberts says it’s just a tax. I feel better already. After all, we have massive taxation on cigarettes. Let’s tax the heck out of butter, whole milk, and cooking oils. While we’re at it we can impose a targeted federal tax on all fried foods and all caffeinated beverages the same as we’re targeting a federal tax already on tanning salons. All of this stuff is just not good for you.

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Let me begin this blog post with a confession: I’m not an economist. I don’t play one on TV and I didn’t even stay in a Holiday Inn last night. I do recognize, however, that the better grasp you have on human behavior the better understanding you’ll have for the economy–the real economy that is the lifeblood of our national success. I also profess to be a student of economics. I began learning from my father, a banker, as a small child and I spent some time in banking myself during a break from seminary training in the 1980s.

Something important I learned from my father is not only that people are social animals, we’re also a bit like cattle. We move together unthinkingly at times, even though we’re headed as a group toward a difficult situation. In my mind’s eye I can see a bunch of talking cattle moving together toward a cliff. One or two begin to complain that there is danger ahead, but habit and intransigence hold the herd together. The pressure of the majority, and the ridicule of others have the effect of convincing the prophets to hush and then the inevitable occurs. The entire herd goes off the cliff.

It’s an effective metaphor for what I think is one of our greatest national problems: an ineffective and out-of-touch elite class of “super citizens” that feeds on political inbreeding, is paralyzed against genuine change that would be good for our nation, produces little or no imaginative thinking other than regulating (telling us what we can’t do) and taxing (seizing what we have earned by our labors), being herded by its own lack of vision toward inevitable destruction and taking us all with them. Its myopia and lack of creativity is supported by a childish cast of media personalities more interested in being stars and supporting “their guy or gal” than doing the difficult work of honest investigative reporting. Human history is littered with examples of failed nations: Assyria, Babylonia, Persia, Greece, Rome, the Ottoman Empire. Must we join them? Even worse, as we go the way of the dinosaur, must we do it so gladly?

What began as classical liberalism was a great boon to humanity. Inspired by the Enlightenment and humanity’s discovery of its own power and ability, it was intended to liberate us from the limited thinking that held us back as a species and mired us in poverty and tyranny. Once established upon the foundation of equal opportunity and equal status before the law, liberalism today has become a sad caricature of what it once was. Ridiculously it attempts to enforce equal outcomes, a fool’s quest if ever there was one. It is bankrupting us, preventing creativity and effort, increasing government at the expense of the economic power of citizens, and encouraging irresponsible monetary policy.

Our politicians are having a great time in Washington. As they play, the economic news gets worse and worse. Remember Nero? They say he fiddled as Rome burned. There’s a whole lot of fiddling going on in Washington these days, and because most of the press is convinced that Democrats care more about the average American than Republicans, they give far too little attention to the dangerous cliff toward which we’re sadly progressing. (By the way, more than one study has confirmed the left-leaning bias of the media, including a 1997 survey by the American Society of Newspaper Editors and a 2002 study by Dartmouth College.) Warning bells are sounding and too few among the political and media class are making note of it.

Will the politicians in their playground agree to the major changes needed? No, most of them won’t–at least not until the pain is unbearable. (There are some voices calling for fiscal responsibility but they are few in DC.) The economic darling of the Left, economist Paul Krugman has gone on record saying that a new round of economic failure will be caused by the fact that we didn’t spend enough when the original problem started! He has become so influential with the present regime in Washington that I no longer refer to the dominant (failing) economic model as a Keynesian one (Keynes argued for government spending as a model for solving economic woes) but as Krugman-Keynesianism. I hope it catches on.

Here’s why Krugman’s call for “more of the same” is so ridiculous. First, it comes at a cost. Yes, government spending can have a positive effect on the economy. But it has a backside cost that is foisted upon the earners and producers who make that economy work. When government spending is out of control its counter-effect is disastrous upon the economy. Second, the Krugman-Keynesian model was predicted to fail by many economists who prefer models other than the big-spending model of Keynes (economists such as those from the Austrian School inspired by Ludwig von Mises).

So let’s make this choice as simple and obvious as possible. We can avoid the cure and spend more even though it was predicted to fail and has now demonstrated its failure, or we can begin to get serious about debt and serious about encouraging people to start businesses, expand businesses, and hire personnel. To do the latter of these two options we’ll have to demonstrate that well-paid government elites see the problem. And let’s be honest. That won’t happen as long as big-spending Democrats control the White House and the Senate.

I suspect we’re looking at a full sweep in DC come November. If the Republicans have the White House and both chambers of Congress, they’ll have to begin some very unpopular measures quickly. And even that may not be enough. Once the economic shoe begins to drop, economic gravity does the rest. And, unfortunately, there are plenty of big-spending politicians in the GOP.

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No matter how many times they’re rejected by their constituents, the ideas of the Ultra-Liberals never go away. They get repackaged and rebranded. Karl Marx had his Communist Manifesto; Barack Obama has his speech from Kansas.

Writing for the Baltimore Sun, Jules Witcover says Obama has finally found “his voice.” Perhaps it’s better to say that he has now become bold enough to speak outloud using the internal voice that has always guided him. With this speech Obama has come out of the closet: he is a Marxist through and through. Like all good Marxists his political language is flowered with talk of equality, but it is regulated by force. And it is directed by a powerful political class enjoying the finest that life has to offer.

What matters to Obama and his like-minded liberal elites is not the building up of a nation and its people but the tearing down of a society so that they can maintain power and cherry-pick for themselves the positions of prestige and wealth. Being a narcissist, Obama believes he can do this through the sheer force of his will. He lectures Congress, he calls down the Supreme Court, and he pressures the leaders of other nations. In his own mind he is the good-hearted dictator who acts for the ultimate good of his people.

As political commentator Charles Krauthammer has said, you cannot understand Obama just by listening to his words. They are nothing but theatrics, designed to distract us from his true agenda. When you hear him speak on television, turn down the volume and let the picture inform you. As distasteful as it is, drink in the image. He is one one man, arrogant in his posture, wealthy in his dress and lifestyle, and surrounded with the trappings of power. Has any imperial leader in history ever done a better job of packaging himself for consumption by the masses?

He cannot implement his vision by telling us the truth. Most of us would reject it out of hand. And so he lies. He pits us against one another because a divided nation is easier to rule. Gradually, and with increasing speed, he and other political elites are withdrawing the liberties that make it possible to respond in opposition.

Operation “Fast and Furious” is a perfect example. Weapons were purchased in the United States by agents of the federal government and provided to Mexican drug lords. Thousands of weapens of every type. The intended goal was that once these weapons began showing up in the drug wars south of our border, public opinion in the US would support stricter gun laws. But it backfired. The truth of this governmental deception is now emerging.

Transfer this scenario to our economy and the disastrous decisions that are destroying our economic vitality. Mr. Obama and his elite cronies are telling us that this worsening situation is not their fault. They are doing everything they can to help the economy, not to destroy it. Turn off the volume. As Krauthammer suggests, ignore what is being said and watch what is being done. Remember that during his campaign Barack Obama promised a fundamental remaking of America. It has begun.

Overextension of the national and international debt are intentional. To remake the global economy a disaster is needed: “out with the old and in with the new.” The house of cards is soon to fall. The economic endgame is near. The European economy is about to collapse. Our collapse will come soon afterward. There are already calls around the globe for ending the American dollar as the world’s reserve currency. The Obama Administration has sent signals to the world that this is acceptable. What will take its place? A new centralized, global control of currency.

This is the brave new world into which Barack Obama is leading us. His “new nationalism” is global citizenship where the rights of a nation’s citizens are subject to ratification by a centralized global authority. If he told us of these plans, most of us would reject this loss of national sovereignty. It’s blatantly unconstitutional. Like “Fast and Furious,” the goal is to manipulate public opinion. If no crisis is at hand, a crisis must be invented. The advocates of centralized global finance are convinced that if the collapse is painful enough we will accept their solution imposed from above.

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It’s one thing when a fringe commentator suggests that riots and bank failures are just around the corner, but it’s a whole other thing when senior government officials in Great Britain do it.

This should be a startling wake-up call to anyone who still doubts that irresponsible spending is destroying the American economy. The United States is following in the footsteps of Europe and what happens there is a prophecy of what could happen here in very short order. In Europe, what was previously unthikable is now becoming a plausibility–even an inevitability.

According to today’s edition of the British newspaper The Telegraph, diplomats in the U.K. are making plans to assist their citizens abroad in the likely event of a collapse of European banks. According to the report by James Kirkup, the paper’s Deputy Political Editor, “a senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.”

In addition, the article reports that British embassies are preparing for social unrest and rioting. In recent weeks the acronym “P.I.I.G.S.” has increasingly been used to refer to the five eurozone nations that may fail first: Portugal, Italy, Ireland, Greece and Spain.

As reported by The Telegraph, “Greece has seen several outbreaks of civil disorder as its government struggles with its huge debts. British officials think similar scenes cannot be ruled out in other nations if the euro collapses. Diplomats have also been told to prepare to help tends of thousands of British citizens in eurozone countries with the consequences of a financial collapse that would leave them unable to access bank accounts or even withdraw cash.”

Is America listening or are we still thinking that it can’t happen here?

To read the entire article in The Telegraph, click here. It should give you nightmares.